How to Make Your Retirement Nest Egg Last Forever

Budgeting for retirement has a fatal flaw: You don’t know how long you’ll live. Family history and current health offer some guidance, but there’s no sure answer. The best you can do is plan ahead for a very, very long retirement.

The majority of Americans haven’t even tried to figure out how much to save for retirement. That’s a mistake. To set your savings target, estimate how much income you’ll need once you retire. A rule of thumb is 80% of your working income. Factor in how much you spend now and which expenses will go up, go down or disappear once you retire. (Need help crunching the numbers? Try our Retirement Savings Calculator.)

Next, calculate how much you’ll have coming in from fixed sources of income, such as Social Security and pensions. If you expect a pension, ask your employer. The Social Security Administration has a benefits calculator. Any gap between expenses and fixed income will have to be filled by savings in IRAs, 401(k)s and other accounts.